"No one can suggest India is a rogue state," Federal Resource Minister Martin Ferguson said, while asking his government to modernise its policy of not supplying uranium to non-NPT States.
"I think this is something the Labor Party has to think about: there should be some flexibility or discretion built into the national policy that enables Australia to handle the delicate situation of India while at the same time forcing full accountability in the use of uranium in civilian power plants," he was quoted as saying by Fairfax media.
The ruling party's current uranium sale policy needs to allow "flexibility and discretion" when it comes to India, said Ferguson, who last month met External Affairs Minister S M Krishna during his Australia visit.
His statement feeds expectations that the Labor party will hold a contentious debate at its next national conference later this year to consider reversing its current uranium sale policy.
Ferguson said that he will not ask Labor to open its ban on uranium exports to countries outside the nuclear non-proliferation treaty (NPT), but rather recognise that India deserves special consideration.
"I accept (that our refusal to export uranium) is a major concern in an otherwise close strategic relationship between Australia and India."
Any future uranium sale to India would be accompanied by a bilateral safeguards agreement such as the one Australia negotiated with China in 2007, and Canberra would want inspections on the ground.
The Minister's comments came after a media report disclosed that a US cable passed to the whistle-blower website Wikileaks indicated that a nuclear fuel deal with India was being seen in the next three to five years.
His remarks also came ahead of an expected move by the Australian Workers'' Union (AWU) to pass a resolution supporting an expansion of uranium mining and endorsing a debate about nuclear power, the report said.